COMARCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held
July 10, 1996
To the Shareholders of COMARCO, Inc.:
The Annual Meeting of the Shareholders of COMARCO, Inc., a California
corporation (the "Company") will be held at the Company's Offices, 5 Jenner,
Suite 100, Irvine, California on July 10, 1996 at 10:00 A.M. for the following
purposes:
1. To consider and act upon a proposal to amend the Company's Bylaws to
provide for a Board of Directors of no less than five and no more than nine
directors, with the initial number of Directors to be fixed at five.
2. To elect five Directors.
3. To transact such other business as may properly come before the meeting,
or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on May 13, 1996, are entitled to notice of and to vote at the Annual
Meeting.
Each shareholder is cordially invited to be present and to vote in person
at the meeting. TO ASSURE REPRESENTATION AT THE MEETING, HOWEVER, SHAREHOLDERS
ARE URGED TO SIGN AND RETURN THE PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. Shareholders who attend the meeting may still vote in person, even if
they have previously mailed a proxy, by notifying the Secretary of their
intention to do so.
BY ORDER OF THE BOARD OF DIRECTORS
EVELYN M. EVANS, Secretary
Yorba Linda, California
May 14, 1996
<PAGE>
COMARCO, INC.
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held
July 10, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of COMARCO, Inc. (the "Company") for use at
the Annual Meeting of Shareholders (the "Annual Meeting") to be held on
Wednesday July 10, 1996 at 10:00 A.M. at the Company's Offices, 5 Jenner, Suite
100, Irvine, California, 92718, or any adjournment thereof, for the purposes set
forth in the accompanying notice of meeting. This Proxy Statement and the
accompanying form of proxy were first mailed to shareholders on or about May 13,
1996.
A shareholder giving a proxy has the power to revoke it at any time before
it is exercised by (1) filing with the Secretary of the Company a notice of
revocation; (2) filing with the Secretary of the Company a duly executed proxy
bearing a later date; or (3) attending the Annual Meeting and expressing his or
her intention to vote the shares in person. In the absence of such revocation,
all shares represented by a properly executed proxy received in time for the
Annual Meeting will be voted as specified therein.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy and the cost of soliciting proxies
will be borne by the Company. The Company may make arrangements with various
brokerage houses or other nominees to send proxy materials to the beneficial
owners of stock and may reimburse them for their reasonable expenses in
connection therewith.
VOTING RIGHTS
The only voting securities of the Company consist of Common Stock. Only
shareholders of record at the close of business on May 13, 1996 will be entitled
to vote at the Annual Meeting. As of said date there were outstanding 4,718,959
shares of Common Stock, which are entitled to one vote per share except that
each shareholder is entitled to cumulate his shares in the election of
Directors, provided that at least one shareholder has given notice, prior to the
voting, of his intention to do so. If cumulative voting is in effect, each
shareholder may give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares held by him, or he
may distribute his votes on the same principle among as many candidates as he
thinks fit. The candidates receiving the largest number of votes, up to the
number of directors to be elected, shall be elected.
Item 1 on Proxy Card
AMENDMENT TO THE COMPANY'S BYLAWS TO CHANGE THE SIZE RANGE OF
THE COMPANY'S BOARD OF DIRECTORS.
Article IV, Section 1 of the Bylaws of the Company currently provides that
the number of Directors of the Company shall not be less than six nor more than
eleven, with the exact number to be fixed from time to time by the Company's
Board of Directors. The present number of Directors, as fixed by the Board of
Directors, is six. The Board of Directors proposes that the Bylaws be amended to
provide for the number of Directors to be set at not less than five nor more
than nine, with the number of Directors to be initially set at five, subject to
change within such range from time to time by the Board of Directors. The form
of the proposed amendment to the Bylaws is included in Exhibit A to this Proxy
Statement.
The Board of Directors believes that reducing the minimum and maximum Board
size is in keeping with the Company's philosophy of maintaining the leanest
organization possible, without compromising the organization's ability to
perform effectively. The range of five to nine still affords the Company enough
directors to provide diversity of background without creating too large of an
organization to work efficiently. The number of Board members is initially set
at five, with the Board of Directors having the ability to change the size of
the Board within the specified range without additional approval by the
shareholders. The five nominees for Director recommended by the Board are
described elsewhere in this Proxy Statement (see "Election of Directors").
The affirmative vote of the shareholders of a majority of the outstanding
Common Stock is required to adopt the proposed amendment to the Bylaws.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PROPOSED BYLAW AMENDMENT CHANGING THE SIZE RANGE OF THE COMPANY'S BOARD OF
DIRECTORS.
Item 2 on Proxy Card
ELECTION OF DIRECTORS
Five Directors will be elected at the Annual Meeting. Each Director elected
at the Annual Meeting will hold office until the next annual meeting of
shareholders and until his successor is duly elected and qualified. It is
intended that the shares represented by the enclosed proxy will be voted, unless
otherwise instructed, for the election of the five nominees named below. While
the Company has no reason to believe that any of the nominees will be unable to
serve as Director, it is intended that if such an event should occur, such
shares will be voted for the remainder of the nominees and for such substitute
nominee or nominees as may be selected by the Board of Directors. Subject to the
foregoing, and unless a shareholder withholds authority to vote his shares (i)
for all of the nominees by so indicating on the enclosed proxy card or (ii) for
any one or more of the nominees by checking their names in the space provided on
such card, in which case his shares will not be voted for such nominee or
nominees. The proxies will have the discretion to cumulate votes as provided by
California law (see "VOTING RIGHTS") and to distribute such votes among all the
nominees (or, if authority to vote for any nominee or nominees has been
withheld) among the remaining nominees in whatever manner they deem appropriate.
All the nominees are currently serving as Directors of the Company. The
term of office of each of the current Directors expires on the date of the
Annual Meeting. All the Directors were elected at the last annual meeting.
The table immediately below contains pertinent information concerning the
nominees and is followed by a brief biography of each nominee.
<TABLE>
<CAPTION>
Year First
Principal Elected Other
Name Age Occupation Director Directorships
---- --- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Don M. Bailey 50 President and Chief 1991 None
Executive Officer of
the Company
Gen. Wilbur L. Creech 69 Executive Consultant 1985 Tech-Sym
(Ret) (1) (3) Corporation, and
ESEA Corporation.
Gerald D. Griffin 61 Executive Consultant 1986 None
(1) (3)
Adm. Wesley L. McDonald 72 Executive Consultant 1986 Precision Standard, Inc.
(Ret) (2) (3)
Paul G. Yovovich 42 President and Chief 1995 Illinois Superconductor,
(1) (2) Operating Officer of Corporation, US Robotics, Inc.
Advance Ross Corporation
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
</TABLE>
Mr. Bailey has been President and Chief Executive Officer of the Company
since June 1990. Prior to that, since November of 1988, he served as Senior Vice
President of the Company and, since January 1986, as Vice President, Corporate
Development. He has been employed by Comarco since May 1980.
General Creech was Commander of the Tactical Air Command headquartered at
Langley Air Force Base, Virginia from 1978 until his retirement in November
1984. He is presently an executive consultant.
Mr. Griffin is presently an executive consultant in Hunt, Texas. Previously
he was Managing Director of the Houston Office of Korn/Ferry International. From
1986 to 1988 he was President and Chief Executive Officer of the Houston Chamber
of Commerce. Between 1981 and 1986 he was Director of NASA's Johnson Space
Center in Houston, Texas.
Admiral McDonald served in various capacities with the United States Navy
from 1946 until his retirement in December 1985. In his last assignment he
served for more than three years as Supreme Allied Commander, Atlantic; US
Commander in Chief, Atlantic; and Commander in Chief, US Atlantic Fleet. He is
presently an executive consultant.
Mr. Yovovich serves as President and Chief Operating Officer of Advance
Ross Corporation, positions he has held since 1993. He served as President of
Central Telephone Company from January 1990 through December 1992.
BOARD ORGANIZATION AND COMMITTEE MEETINGS
During the fiscal year ended January 31, 1996, the Company's Board of Directors
met five times and various committees of the Board met a total of seven times.
Each of the Company's Directors attended at least 75% of the total number of
meetings of the Board of Directors and meetings of the Committees on which he
served (during the periods within which he was a Director or Member of such
Committee) during the Company's last fiscal year.
Standing committees of the Board of Directors include the following:
The Audit Committee's primary purpose is to aid the directors in undertaking and
fulfilling their responsibilities for financial reporting to the shareholders;
to support and encourage efforts to improve the financial controls exercised by
management and to ensure their adequacy for purposes of public reporting; and to
review the engagement of the Company's independent auditors and review with such
accountants the scope and results of their annual audit of the Company. The
Audit Committee met twice during the year in conjunction with regular Board
Meetings.
The Compensation Committee reviews the compensation of officers and key
employees, and makes awards under the Company's 1982 and 1995 Employee Stock
Option Plans and the Stock Option Plan for the Company's subsidiary, Comarco
Wireless Technologies, Inc. The Compensation Committee met three times during
the fiscal year, including one telephone meeting.
The Nominating Committee's responsibilities include reviewing the qualifications
of candidates for board membership, reviewing the status of directors when his
or her principal position and/or primary affiliation changes, recommending to
the Board of Directors, candidates for election by shareholders at annual
meetings, recommending candidates to fill vacancies in directorships, and making
recommendations to the Board of Directors concerning selection, tenure,
retirement, and composition of the Board of Directors. The Nominating Committee
met twice during the year in conjunction with regular Board Meetings.
DIRECTORS COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Cash Compensation Security Grants
---------------------------------------------- -------------------------------------
Annual Meeting Consulting Fees/ Number of Number of Securities
Name Retainer Fees Fees Other Fees Shares Underlying Options/SARs
- ---- ------------- ------- ---------------- --------- -----------------------
<S> <C> <C> <C> <C> <C>
Wilbur L. Creech $18,000 $14,000 $0 0 5,000 shares
Gerald D. Griffin $80,000 $0 $40,000 0 5,000 shares
(Chairman) (bonus)
Wesley L. McDonald $18,000 $13,750 $0 0 5,000 shares
Walter V. Sterling $18,000 $8,250 $0 0 5,000 shares
Paul G. Yovovich $10,500 $5,250 $0 0 0
Notes
(1) Each member of the Board other than Mr. Griffin and Mr. Bailey (who serves
as an officer and employee) received a daily Director's Fee of $1,500 per
meeting, $750 per telephone meeting, and a monthly retainer of $1,500. Mr.
Griffin received a monthly payment of $6,667 in lieu of meeting fees and
retainers. Members of the various committees received a $750 meeting fee,
except that the Committee Chairman received an additional $500 per meeting.
Each Director was reimbursed for reasonable lodging and expenses incurred
to attend Board and Committee meetings.
(2) Stock option award was made on 4/30/95 at the then current market price of
$11.50.
(3) Mr. Yovovich became a director in July. His annual retainers and meeting
fees reflect his partial year of service.
</TABLE>
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/96
<TABLE>
<CAPTION>
Options Percent of Total/ Exercise Expiration Potential Value
Name Granted Options Granted Price Date @ 5% @10%
- ---- ------- ----------------- -------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wilbur L. Creech 5,000 25% $11.50 5/10/05 $36,161 $91,640
Gerald D. Griffin 5,000 25% $11.50 5/10/05 $36,161 $91,640
(Chairman)
Wesley L. McDonald 5,000 25% $11.50 5/10/05 $36,161 $91,640
Walter V. Sterling 5,000 25% $11.50 5/10/05 $36,161 $91,640
Paul G. Yovovich 0 0% $0 $0
Notes:
(1) Vesting of options takes place 25% a year starting one year from the date
of grant.
(2) Expiration of options takes place ten years and one week from the date of
grant.
(3) Termination of vested options takes place ninety days after termination of
directorship.
(4) Values shown as "Potential Value" are net of the exercise price.
(5) Options are awarded each April 30 in accordance with the plan document. Mr.
Yovovich was not a Director at time of award.
</TABLE>
OPTION EXERCISES FOR FISCAL YEAR ENDED 1/31/96
<TABLE>
<CAPTION>
Shares Acquired Value Number of Unexercised(1) Value of Unexercised(2)
Name on Exercise Realized Vested Unvested Vested Unvested
- ---- --------------- -------- ------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
Wilbur L. Creech 0 0 2,750 10,250 $29,025 $76,825
Gerald D. Griffin 0 0 57,750 10,250 $791,875 $76,825
(Chairman)
Wesley L. McDonald 0 0 35,250 10,250 $479,800 $76,825
Walter V. Sterling 0 0 35,250 10,250 $479,800 $76,825
Paul G. Yovovich 0 0 0 0 $0 $0
Notes:
(1) Vested options include those exercisable within 60 days of fiscal year
start (February 1)
(2) Value at the end of the Company's Fiscal Year, which was $15.75 a share,
minus the average grant price for each director.
</TABLE>
COMPLIANCE WITH REPORTING REQUIREMENTS
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
Rules issued thereunder, the Company's executive officers and directors are
required to file with the Securities and Exchange Commission reports of
ownership and changes in ownership of the Common Stock. Based solely on its
review of the copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that, during
Fiscal Year 1996, its executive officers and directors complied with the Section
16(a) requirements.
OWNERSHIP OF SECURITIES
The following table sets forth information concerning the ownership of the
Company's outstanding common stock as of February 1, 1996, except as otherwise
noted, by persons who are Directors, Executive Officers, nominees or persons
known to the Company as beneficial owners of five percent or more of its
outstanding common stock. The table also includes the stock ownership of all
Directors and Executive Officers of the Company as a group. Unless otherwise
indicated, the Company believes that each of the persons listed in the table
(subject to applicable community property laws) has the sole power to vote and
to dispose of the shares listed opposite his name.
<TABLE>
<CAPTION>
Name and Address Office, Number of Shares Percent
of Beneficial Owner If Any Beneficially Owned Of Class Notes
------------------- ------- ------------------ -------- -----
<S> <C> <C> <C> <C>
Don M. Bailey Director, President 134,731 2.9 (1) (2)
Chief Executive Officer
Gen. Wilbur L. Creech (Ret.) Director 3,750 * (3)
Gerald D. Griffin Chairman of 60,250 1.3 (4)
The Board
Adm. Wesley L. McDonald (Ret.) Director 36,250 * (5)
Walter V. Sterling Director 83,182 1.8 (6)
Paul G. Yovovich Director 3,500 *
Thomas A. Franza Executive Vice President 2,500 * (7)
Richard C. Loomis Sr. Vice President 3,500 * (8)
Robert L. O'Leary Vice President, 14,625 * (9)
Assistant Secretary
Thomas P. Baird Vice President, 19,603 * (10)
Chief Financial Officer
Evelyn M. Evans Vice President, Secretary 20,800 * (11)
John C. Hillis Sr. Vice President 13,250 * (12)
Directors and Officers 395,941 8.5
As a Group (12 persons)
COMARCO, Inc. 275,363 6.0 (13)
Employee Benefit Trusts
Alan S. Parsow 471,100 10.1 (14)
Parsow Partnership, Ltd.
222 Skyline Drive
Elkhorn, NE 68022
T. Rowe Price Associates 294,400 6.3 (15)
100 East Pratt Street
Baltimore, MD 21202
Gary Kohler 384,700 8.3 (16)
Okabena Company
5140 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Wanger Asset Management, L.P. 587,600 12.7 (17)
Wanger Asset Management, Ltd.
Ralph Wanger
227 West Monroe St., Ste 3000
Chicago, Illinois 60606
* Indicates less than one percent
(1) Dispositive and voting rights shared with spouse.
(2) Includes 112,500 shares which Mr. Bailey has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(3) Includes 2,750 shares which General Creech has a right to acquire within 60
days after February 1, 1996, by stock option exercise.
(4) Includes 57,750 shares which Mr. Griffin has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(5) Includes 35,250 shares which Admiral McDonald has the right to acquire
within 60 days after February 1, 1996, by stock option exercise.
(6) Includes 35,250 shares which Mr. Sterling has the right to acquire within
60 days after February 1, 1996, by stock option exercise.
(7) Includes 2,500 shares which Mr. Franza has the right to acquire within 60
days after February 1, 1996, by stock option exercise. Does not include
options to acquire shares in the Company's subsidiary Comarco Wireless
Technologies, Inc. See section entitled "Stock Options".
(8) Includes 2,500 shares which Mr. Loomis has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(9) Includes 8,750 shares which Mr. O'Leary has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(10) Includes 18,750 shares which Mr. Baird has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(11) Includes 20,000 shares which Ms. Evans has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(12) Includes 13,250 shares which Mr. Hillis has the right to acquire within 60
days after February 1, 1996, by stock option exercise.
(13) Includes shares held in the Employee Savings and Retirement Trust, of which
the Company is the administrator. Under the beneficial ownership rules
promulgated by the Securities and Exchange Commission, the Company could be
deemed to be a beneficial owner of such shares. All such shares are
allocated to the accounts of Plan participants and are subject to and voted
in accordance with the direction of the participants. These shares were
transferred to the Plan upon the termination of the Employee Stock
Ownership Plan. Also includes shares held by the Savings and Retirement
Plan, not formerly held by the ESOP. Under the beneficial ownership rules
promulgated by the Securities and Exchange Commission, the Company could be
deemed to be a beneficial owner of such shares. These shares are also voted
in accordance with the direction of the participant. The assets of both
trusts are under the trusteeship of Smith Barney Corporate Trust Company.
The number of shares listed is as of February 29, 1996.
(14) Taken from Amendment No. 8 to Schedule 13D filed with the Securities and
Exchange Commission on January 14, 1992.
(15) Taken from Schedule 13G filed with the Securities and Exchange Commission
on February 14, 1996. These securities are owned by various individual and
institutional investors which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
(16) Taken from Schedule 13D filed with the Securities and Exchange Commission
on behalf of The Okabena Company, a Minnesota General Partnership, on March
19, 1993 through Amendment 3 filed on December 22, 1995, and updated via
letter dated February 14, 1996.
(17) Taken from Schedule 13G filed with the Securities and Exchange Commission
on February 12, 1996 on behalf of Wanger Asset Management, L.P. ("WAM"),
Wanger Asset Management, Ltd. ("WAM LTD."), and Ralph Wanger ("Wanger").,
and updated via letter dated April 18, 1996. WAM is an investment adviser
registered under section 203 of the Investment Advisers Act of 1940. WAM
LTD is the general partner of the investment adviser. Wanger is the
principal stockholder of the general partner. Included are COMARCO shares
held in Acorn Investment Fund, Series Designated Acorn Fund, a
Massachusetts business trust, for which this entity has voting rights.
</TABLE>
EXECUTIVE COMPENSATION
The Company's executive compensation structure consists of salaries, cash
incentive awards and stock option awards. This structure is administered by a
committee of the Board of Directors (the Compensation Committee) consisting
solely of outside directors who are "disinterested" within the meaning of the
rules and regulations of the Securities and Exchange Commission. The Company's
CEO recommends compensation levels for the Company's officers, except for
himself, to the Compensation Committee. The Committee adjusts these
recommendations and approves final compensation levels for these officers. In
addition the Committee sets the compensation level for the CEO and the Chairman
of the Board. Incentive compensation is based upon pre-established quantitative
goals, typically stock price, profitability and new business bookings and
qualitative goals, such as customer satisfaction.
The information on cash compensation set forth below is furnished for the
Fiscal Year ended January 31, 1996 for the Chief Executive Officer and four most
highly compensated executive officers whose cash compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------ -----------------------------------------------------
Name and Other Restricted Long Term
Principal Fiscal Annual Stock Options Incentive All Other
Position Year Salary ($) Bonus ($) Compensation Number Options # Payouts ($) Compensation ($)
- ------------------ ------ ---------- --------- ------------ ------------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don M. Bailey 1996 211,894 235,000 0 0 25,000 0 4,500
President & CEO 1995 191,797 150,000 0 0 0 0 4,500
1994 176,022 95,000 0 0 25,000 0 7,075
Thomas P. Franza 1996 176,031 225,000 0 0 10,000 0 4,500
Executive 1995 131,000 150,000 0 0 0 0 4,500
Vice President 1994 177,596 100,000 0 0 0 0 5,608
Richard C. Loomis 1996 137,569 42,000 0 0 10,000 0 4,500
Sr. Vice President 1995 132,764 40,000 0 0 0 0 4,011
1994 115,904 35,000 0 0 0 0 5,397
Thomas P. Baird 1996 120,516 30,000 0 0 5,000 0 4,500
Vice President 1995 117,280 28,000 0 0 0 0 4,500
Chief Financial 1994 110,718 30,000 0 0 7,500 0 4,252
Officer
Evelyn M. Evans 1996 115,484 45,000 0 0 5,000 0 4,273
Vice President 1995 111,242 28,000 0 0 0 0 4,177
Secretary 1994 99,348 30,000 0 0 7,500 0 3,732
Notes:
(1) "Other Annual Compensation" amounts were below reporting thresholds.
(2) "All Other Compensation" amounts are Company contributions to the Company's
Savings and Retirement Plan.
(3) Mr. Bailey has an agreement with the Company to the effect that his
termination or constructive termination following a change in control of
the Company entitles him to two years of base salary and incentive
compensation of the planned level for that year or the amount paid in the
year before the change of control, whichever is greater.
(4) "Salary" includes compensation deferred during the current year, earnings
on compensation deferred from prior years and cashed out vested vacation
payments.
</TABLE>
STOCK OPTIONS
The following tables set forth for each person and group named in the
executive compensation table above, information concerning (i) options granted
by the Company during the period from February 1, 1995 to January 31, 1996 and
(ii) options exercised during such period.
OPTION GRANTS FOR FISCAL YEAR ENDED 1/31/96
<TABLE>
<CAPTION>
Options Percent of Total/ Exercise Expiration Potential Value
Name Granted Options Granted Price Date @ 5% @10%
- ---- -------- ----------------- -------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Don M. Bailey 25,000 22.9% $8.63 2/29/05 $135,923 $343,043
Thomas A. Franza(5) 10,000 9.2% $8.63 2/29/05 $54,369 $137,217
Richard C. Loomis 10,000 9.2% $8.63 2/29/05 $54,369 $137,217
Thomas P. Baird 5,000 4.6% $8.63 2/29/05 $27,185 $68,809
Evelyn M. Evans 5,000 4.6% $8.63 2/29/05 $27,185 $68,609
Notes:
(1) Vesting of options takes place 25% a year starting one year from the date
of grant.
(2) Expiration of options takes place ten years and one week from the date of
grant.
(3) Termination of vested options takes place ninety days after termination of
employment.
(4) Values shown as "Potential Value" are net of the exercise price.
(5) During the year, Mr. Franza was awarded a total of 3,500 option grants
under a stock option plan for one of the Company's subsidiaries, Comarco
Wireless Technologies. Vesting of options takes place 25% a year starting
one year from the date of grant.
</TABLE>
OPTION EXERCISES FOR FISCAL YEAR ENDED 1/31/96
<TABLE>
<CAPTION>
Shares Acquired Value Number of Unexercised(2) Value of Unexercised(3)
Name on Exercise Realized(1) Vested Unvested Vested Unvested
- ---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Don M. Bailey 0 0 112,500 62,500 $1,304,788 $343,043
Thomas A. Franza(4) 35,000 $307,317 2,500 30,000 $17,800 $104,325
Richard C. Loomis 28,625 $193,437 2,500 10,125 $17,800 $80,621
Thomas P. Baird 0 0 18,750 12,500 $239,925 $74,913
Evelyn M. Evans 0 0 20,000 13,750 $244,438 $87,875
Notes:
(1) Market values on the date of exercise, net of the exercise price.
(2) Vested options include those exercisable within 60 days of fiscal year
start (February 1).
(3) Value at the end of the Company's Fiscal Year, which was $15.75 a share,
minus the average grant price for each officer.
(4) Mr. Franza has a total of 9,500 option grants under a stock option plan for
one of the Company's subsidiaries. Of the 9,500 options, 2,000 are vested
and 7,500 are unvested. Based on current valuation, the vested shares are
valued at $204,825, and the unvested shares at $633,120. Three other key
Comarco Wireless Technologies, Inc. employees have comparable option grants
and values.
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To: The Board of Directors
As members of the Compensation Committee, it is our duty to establish the salary
and incentive compensation of the President and Chief Executive Officer and to
review, to revise as appropriate, and to approve the Chief Executive Officer's
recommendations for the salaries and incentive compensation of the Company's
executive officers. Since 1985, the Compensation Committee of the Board of
Directors, composed exclusively of directors who are not employees of the
Company, has received a comprehensive written and oral corporate performance
report from the company's Chief Executive Officer. This report presents
corporate performance against predetermined quantitative and qualitative
performance objectives. The report summarizes the results for each of the
Company's operations and provides explanation for each compensation
recommendation made by the Chief Executive Officer. The Committee, after
appropriate inquiry and modification, approves compensation recommendations and
establishes appropriate compensation for the Chief Executive Officer, and for
the Chairman of the Board. (The Compensation Committee meets without Mr. Griffin
on all matters relating to the compensation of the Chairman of the Board.)
Performance objectives and incentive goals are established at the outset of each
year, together with salary levels. Incentive awards are made after the close of
each fiscal year. Incentive compensation is based on quantitative performance
factors (stock price, profit and new business) as well as a number of
qualitative factors related to long-term performance. For the Chief Executive
Officer, the Chairman, and other Executive Officers, for fiscal year 1996;
quantitative factors were considered more important than qualitative factors.
The Committee adheres to the following philosophy regarding compensation of the
Company's executive officers:
o to provide competitive total pay opportunities in order to attract, retain,
and motivate high quality executive talent critical to the Company's
success.
o to pay for performance through a compensation mix that emphasizes
competitive cash incentives and merit- based salary increases and
de-emphasizes entitlements and perquisites.
o to create a mutuality of interest between executives and shareholders
through a stock option program.
o to focus the executive's attention on overall corporate objectives as well
as the executive's specific operational objectives.
The key elements of the Company's executive compensation program are base
salary, annual incentive compensation, and stock options. The Committee's
policies with respect to each of these elements, including the basis for the
compensation paid and awarded to Mr. Bailey, the Company's President and CEO,
are described below. While the elements of compensation are considered
separately, the Committee takes into account the total compensation package
afforded by the Company to the individual.
Base Salaries
Base salaries for executive officers are initially determined by evaluating
responsibilities of the position held and the experience of the individual, and
including a comparison for comparable positions at other companies. Each year,
the Company uses data compiled from a nationwide compensation survey of
approximately 200 small to medium size private and publicly traded companies.
Comparisons are made based on like-sized companies and those in similar
industries. The Committee uses these data to assist in establishing base
salaries. In general, base salaries and total compensation are targeted to be
consistent with these data.
Annual salary adjustments are determined by evaluating the performance of the
Company and of each executive officer and reviewing base salaries for comparable
positions contained in the survey data mentioned above. In addition, the
Committee takes into account any new responsibilities. The Committee, where
appropriate, also considers non-financial performance measures. These include
such areas as: increase in market share, customer service, working capital
management, employee relations, and leadership development.
Concerning Mr. Bailey, the Committee took into account a comparison of base
salaries of chief executive officers of the other companies contained in the
national salary survey mentioned above, the Company's success in meeting several
financial goals, including return on investment and earnings per share; the
performance of the Company's stock; and the assessment of Mr. Bailey's
individual performance, including his development of long-term strategies for
the continued diversification of the Company away from government contracting
toward wireless communications. Consistent with these criteria, President and
CEO Mr. Bailey received a salary of $211,894 (an increase of 10.5%) in the
Fiscal Year ended January 31, 1996.
Incentive Compensation
The Company's officers and other key employees are eligible for annual cash
incentive compensation. For executive officers, individual and corporate
performance objectives are established at the beginning of each fiscal year.
Eligible executives are assigned performance goals and corresponding incentive
compensation targets. The Company performance measure is based on financial and
new business goals.
For Mr. Bailey, financial indicators, such as net income, earnings per share and
stock price weigh heaviest in determining the amount of incentive compensation.
The Committee elected to award Mr. Bailey incentive compensation of $235,000,
which was $85,000 more than in the previous Company fiscal year. This increase
in incentive compensation reflected the achievement of greater goals than in the
prior fiscal year. The Company continues to achieve success in its efforts to
diversify its business base and decrease dependence on government contracting
work. The average price of the Company's Common Stock during the fiscal year
increased over 75% from the average of the prior fiscal year.
Stock Options
Stock options are designed to align the interests of executives with those of
the shareholders. The size of the option awards are entirely at the discretion
of the Committee. The Committee takes into account the total compensation
offered to its executives when considering the number of options awarded each
year.
Stock option awards to officers and employees were made in this fiscal year. The
awards to the listed Executive Officers are shown on in the section entitled
"Stock Options".
The Compensation Committee continuously reviews the company's executive
compensation policy or plans to determine if revisions may be necessary due to
provisions of the Omnibus Budget Reconciliation Act of 1993. This legislation
amended Section 162 of the Code by limiting to $1,000,000 the deductibility of
compensation paid to certain executives. It is the current policy of the
Compensation Committee to preserve, to the extent reasonably possible, the
Company's ability to obtain a corporate tax deduction for compensation paid to
executive officers of the Company to the extent consistent with the best
interests of the company and its stockholders.
Submitted by the Committee:
General Wilbur L. Creech, Chairman
Gerald D. Griffin
Paul G. Yovovich
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following Directors served on the Company's Compensation Committee for the
awards and decisions discussed above.
Gen. Wilbur L. Creech, Chairman
Gerald D. Griffin
Paul G. Yovovich
None of the members of the Compensation Committee served as an officer or
employee of the Company or its subsidiaries during this fiscal year, except for
Mr. Griffin, the Company's Chairman of the Board (a statutory office under
California law).
None of the members had any relationship with the Company requiring disclosure
under Item 404 of SEC Regulation S-K.
There were no committee interlocks with other companies within the meaning of
the Securities and Exchange Commission's rules.
PERFORMANCE COMPARISON
The following graphical presentation provides an indication of total shareholder
returns for COMARCO as compared to the Russell 2000 Stock Index and a peer group
of companies. The presentation assumes $100 invested on January 31, 1991 in
COMARCO Common Stock, the Russell 2000 Stock Index, and the Common Stock of a
Peer Group of Companies. The Russell 2000 Stock Index is a broad index of 2000
small capitalization common stocks (the 1001st through 3000th largest public
companies). While investors cannot invest in the Russell 2000 Stock Index
directly, they may construct a synthetic position equivalent to an investment in
the index using derivative securities traded on the Chicago Board Options
Exchange (CBOE). The Peer Group comprises nine companies of similar size (in
terms of assets and revenue) and business focus as COMARCO. While none of the
selected peers offer a fully comparable range of products and services to
COMARCO, they are recognized as providers of high technology electronic,
computer, and communications systems engineering services primarily in US
government markets with a presence outside of the government sector. The returns
of each company have been weighted according to their respective stock market
capitalization for the purposes of arriving at a peer group average. Dividends
paid by those peer companies that pay dividends are assumed to be reinvested at
the end of the ex-dividend month without any transaction cost. The members of
the peer group are as follows: Analysis & Technology (AATI), CACI International
(CACI), Dynamics Research (DRCO), ECC International (ECC), GeoDynamics (GDYN),
Halifax (HX), Nichols Research (NRES), National Technical Systems (NTSC) and VSE
(VSEC). This is the same group of peer companies which was used for a comparison
in the previous year.
As noted on the graph shown on page 15, an investment of $100 in COMARCO Common
Stock on January 31, 1991 would have grown in value to $663 as of January 31,
1996. For the five year period ending January 31, 1996, the total cumulative
return for holders of COMARCO common stock amounted to 563%, or the equivalent
of 46% per year compounded annually. By comparison, $100 invested in the peer
group composite would have grown in value to $194, assuming the reinvestment of
dividends from those companies which paid dividends. For the five year period
ending January 31, 1996, the total cumulative return for the peer group
composite was 94%, or the equivalent of 14% per year compounded annually. The
returns of COMARCO exceeded the comparable return of the Russell 2000 Stock
Index, unlike the Peer Group.
The following table displays a summary of the relative performance on an annual
basis. The accompanying graph depicts the relative performance of COMARCO in
relation to the Peer Group and to the Russell 2000 Stock Index.
[graph omitted: Comparison of Cumulative Return]
<TABLE>
<CAPTION>
1/31/91 1/31/92 1/31/93 1/31/94 1/31/95 1/31/96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Comarco 100 263 226 205 368 663
Peer Group 100 102 118 140 157 194
Russell 2000 Index 100 142 158 185 171 219
</TABLE>
EXECUTIVE OFFICERS
The following table sets forth pertinent information concerning the persons
who are the current executive officers (who are not Directors) of the Company.
<TABLE>
<CAPTION>
Name Age Capacity
---- --- --------
<S> <C>
Thomas P. Baird 42 Vice President and Chief Financial Officer of the
Company; Vice President, CFO and Assistant Secretary of
International Business Services, Inc.; Vice President, CFO and
Assistant Secretary of Decisions and Designs, Inc.; Vice President
and CFO of Comarco Wireless Technologies, Inc.; Vice President
and CFO of LCTI, Inc.; Vice President and CFO of MTTC, Inc.; Vice
President and CFO of Comarco Wireless Europe, Inc.
Evelyn M. Evans 40 Vice President, Administration; Secretary of the Company
Thomas A. Franza 53 Executive Vice President of the Company; President of Comarco
Wireless Technologies, Inc.; President of Comarco Wireless Europe, Inc.
John C. Hillis 50 Sr. Vice President of the Company; President of International
Business Services, Inc.; President of LCTI, Inc.; General Manager
of Comarco Systems
Richard C. Loomis 47 Sr. Vice President of the Company; Vice President of
International Business Services, Inc.; General Manager
of COMARCO Airport Management Services Division
Robert L. O'Leary 64 Vice President and Assistant Secretary of the Company; Vice
President and Secretary of International Business Services,
Inc.; Vice President and Secretary of Decisions and
Designs, Inc.; Vice President and Secretary of Comarco Wireless
Technologies, Inc.; Vice President and Secretary of LCTI, Inc.;
Vice President and Secretary of MTTC, Inc.; Vice President
and Secretary of Comarco Wireless Europe, Inc.
</TABLE>
Mr. Baird has served as Chief Financial Officer of the Company since
September 1992, and Vice President and Controller of the Company since November
1988. From December 1987 to November 1988 he served as Vice President, Treasurer
and Assistant Secretary of International Business Services, Inc., a wholly-owned
subsidiary of the Company. From September to December 1987 he served as
Assistant to the Company's Chief Financial Officer. Prior to joining the
company, he was a Division Controller for Western Gear Corporation from November
1985 to September 1987. Prior to that time, he served in various financial and
accounting positions at Becor Western, Inc.
Ms. Evans joined the Company in January 1986 in the field of contracts
administration. Subsequently, she designed budget models for the Company in her
capacity as Manager of Plans and Analysis. Ms. Evans was promoted to Vice
President in March 1989 and became Secretary of the Company in May 1996. Prior
to joining the Company, Ms. Evans served for six years as an Officer in the
United States Army.
Mr. Franza is President of Comarco Wireless Technologies Inc. and Executive
Vice President of this Company. Previously, Mr. Franza was General Manager of
the Company's Advanced Technologies Division since January 1986, and has been a
Vice President of the Company since July 1990. In October 1992 he was appointed
Sr. Vice President, then in July 1995, to Executive Vice President.
Mr. Hillis has served as Manager of Engineering Services Business
Development and as a Vice President of International Business Services prior to
his appointment as Vice President of the Company in August 1991. Mr. Hillis was
named Sr. Vice President in December 1994. He also served as President of
International Business Services, Inc.
Mr. Loomis has been a Vice President of the Company since November 1989. He
is also General Manager of the Company's Airport Management Services Division.
In October 1992 he was appointed Sr. Vice President. His prior management
positions with the Company include Project Manager and Division Manager at the
Facilities Management Division. Mr. Loomis joined the Company in April 1986.
Mr. O'Leary has served as Vice President and Secretary of the Company since
November 1988 and as Corporate Counsel since April 1986. He served as Assistant
Secretary of the Company from July 1987 to November 1988, and in May 1996
resumed the role of Assistant Secretary. Prior to joining the Company, Mr.
O'Leary was Vice President and Director of Contracts for Decisions and Designs,
Inc.
SELECTION OF AUDITORS
KPMG Peat Marwick has been selected as the Company's independent certified
public accountants for the fiscal year ending January 31, 1997. Representatives
of KPMG Peat Marwick are expected to be present at the Annual Meeting and will
have an opportunity to make a statement if they so desire and to respond to
appropriate questions from shareholders.
PROPOSALS FOR SUBMISSION AT NEXT ANNUAL MEETING
If a shareholder desires to submit a proposal to his fellow shareholders at
the Company's 1997 Annual Meeting, such proposal must be received by the Company
at its corporate office no later than January 13, 1997 and otherwise comply with
applicable regulations in order to be included in the Proxy Statement for that
meeting.
OTHER MATTERS
The Board of Directors of the Company does not know of any matter to be
acted upon at the meeting other than the matters described above. If other
matters properly come before the meeting, the holders of the proxies will vote
on such matters in accordance with their judgment.
The Company's 1996 Annual Report to Shareholders is enclosed with this
Proxy Statement.
IN ORDER TO AVOID ADDED EXPENSE OR ADDITIONAL SOLICITATION OF PROXIES, YOU
ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED.
By ORDER OF THE BOARD OF DIRECTORS
Evelyn M. Evans, Secretary
May 14, 1996
<PAGE>
PROXY COMARCO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS CALLED FOR JULY 10, 1996
The undersigned shareholder(s) of COMARCO, Inc. a California corporation,
having received the Notice of Annual Meeting of Shareholders and Proxy Statement
dated May 14, 1996, hereby appoints Gerald D. Griffin and Evelyn M. Evans as
Proxies, each with the power to appoint a substitute, and hereby authorizes them
to represent the undersigned at the Annual Meeting of Shareholders of COMARCO,
Inc. to be held on July 10, 1996 at 10:00 AM at the Company's Offices at 5
Jenner, Suite 100; Irvine California, and at any adjournments thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
thereat on all matters set forth below, as described in the accompanying Proxy
Statement:
1. PROPOSAL TO AMEND BYLAWS TO CHANGE BOARD SIZE RANGE TO FIVE THROUGH NINE FROM
SIX THROUGH ELEVEN WITH THE CURRENT SIZE AT FIVE.
[] FOR [] AGAINST [] ABSTAIN
2.ELECTION OF DIRECTORS: [] FOR all nominees listed below [] WITHHELD AUTHORITY
to vote for
any nominees
(INSTRUCTION: To withhold authority to vote for any individual nominee,
mark the box next to the nominee's name below.)
[] Wilbur L. Creech [] Wesley L. McDonald [] Paul G. Yovovich
[] Gerald D. Griffin [] Don M. Bailey
IMPORTANT - PLEASE SIGN ON THE OTHER SIDE
<PAGE>
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
In the event the Directors are to be elected by cumulative voting, the
Proxies will have the discretion to cumulate votes and to distribute such votes
among all nominees (or if authority to vote for any nominee or nominees has been
withheld, among the remaining nominees, if any) in whatever manner they deem
appropriate.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE BYLAW CHANGE TO MODIFY THE BOARD RANGE AND FOR ALL OF THE
DIRECTORS NOMINATED BY THE BOARD.
Dated: -----------------------------------, 1996
------------------------------------------------
(Signature)
------------------------------------------------
(Signature)
(Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator
trustee or guardian, please set forth your full title. If signer is a
corporation, please sign the full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ACCOMPANYING
PREPAID ENVELOPE.
EXHIBIT A
AMENDMENT TO BYLAWS OF COMARCO, INC.
The Bylaws of Comarco, Inc. are proposed to be amended as follows:
Article IV is amended by changing subdivision (a) and (b) of Section 1 thereof
to read as follows:
"Section 1. Number of Directors.
(a) The authorized number of directors shall be no less than five
nor more than nine. The exact number of directors shall be fixed from
time to time, within the limits specified in this subdivision, by an
amendment of subdivision (b) of this section adopted by the Board of
Directors.
(b) The exact number of directors shall be five until changed as
provided in subdivision (a) of this section."
